WHAT’S YOUR HOME WORTH?
Are high house prices really such a good thing? It goes against the received wisdom to even ask that question but humour me anyway. Remember, if you are selling then high prices are great but not so if you are buying.
We are all drilled to understand that the home is the largest investment most of us will ever make. Indeed the system is skewed to ensure you could never work and save the amount needed to buy your first home with cash, no matter how hard you tried. So every first time buyer must borrow and that introduces the frightening spectre of the banks.
These days there are so many young people continuing to live with their parents because rented accommodation is just so expensive. Compare the Irish and European models for a moment. On the continent, it is popular to rent for life whereas in Ireland, we all aspire to own our house. In theory, the bricks and mortar were a wealth fund building up in the background whereas rent was money down the drain. But the financial crash and negative equity put paid to all of that and while rent is still money down the drain, home ownership can now be an unexpected large debt due to negative equity.
But the core of the issue is that each and every one of us needs a roof over our heads. We need a place to live as one of life's basics. The family home is not an investment because it is a necessity. If you sell it and realise your asset you will still need somewhere to live. When house prices are high then rent prices are too. The result is that your cash mountain begins to quickly drain away and all of the old familiarities of the family home are gone.
I have never once considered my own house as an investment. I will not be taking it with me when I die but from now until then, I have a roof over my head and am secure at least in that knowledge. If I go first then my better half will have a roof over her head until she joins me on the other side. Then, and only then, will this little house we brought up two kids in, become an asset. It will be shared between my son and daughter in any way they decide and that is my final will and testament. They are both well educated but in the modern world, that may not be enough and when the time comes, they may both need a roof over their heads too.
Investments are made using money with the expressed purpose of making even more money. I have never believed you can do that with the family home. It would never have occurred to me during the years of mortgage repayments to borrow against our so-called asset or gamble with it in any shape or form. Potential homelessness for my little family was never a consideration. However, I can clearly see how ownership of a second house would be seen as a financial asset. Be it a holiday home or an urban four up three down, it can be a source of additional income and when the markets turn down, it can disposed of to realise a one off financial gain. The family home should remain untouched though and that sentiment should be enshrined in the Constitution.
So, are high house prices really such a good thing? In this, I would distinguish between a house and a home. Renters are transient by nature and tenants move on. Families tend to stay in the same place for years for many good reasons so in my opinion, homes should be affordable and houses for rent should be governed by market rates. An investment property should be just that with all the possible perils and rewards that go with any investment. I once bought Apple shares at $11.00ea but sold them long before they went over $1,000. A tidy sum changed hands in my favor but other investments I have made did not have such a happy ending. But the Apple share purchase did not come out of my mortgage repayments. That is the difference.
Losing an investment property, either back to the bank or by selling on at a loss, is a pretty negative thing. But you can go home and stew on it with a roof still over your head and food on the table. Losing the family home on the other hand, is a defining moment in life, one you might not recover from. And whatever about the adults involved, the real innocents who will suffer the most from the loss of the family home are the vulnerable young. Their own space as well as their security is suddenly gone and Mommy & Daddy are standing with them on the street outside obviously lost for words. Everything the child has learned about life up to that point is instantly destroyed and a vacuum created.
So if I could rule the land and make laws, I would decree the family home as a sacred institution, a place that cannot be taken away so that a faceless institution can re-coup their investment or even make a profit. Banks are morally corrupt as we know and should never be respected by any of us. They are legalized criminals and the more senior of their ranks should be behind bars for life. When seeking a loan they will tell you they are in the 'risk' business as a justification for wanting collateral far beyond the value of the loan. But where's the risk if they can't lose as well as win? They are not in the risk business, the poor fuckers they loan to are the real ones taking the risks. Maybe that's okay when you are gambling with investment funds but it is not okay when the family home is at risk. I would create a process for registering a house as a family home and thereafter, it would be impossible to re-possess, Full Stop!